NAIC 2019 Summer Meeting Highlights
According to Mark Twain, “Make your mark in New York and you are a made man.” The National Association of Insurance Commissioners (NAIC) made its mark in the “city that never sleeps” bringing in 2,338 attendees to its Summer 2019 meeting. The Statutory Accounting Principles (E) Working Group (SAPWG) marked a few adoptions, which are summarized below.
Statutory Accounting Updates
The following FASB ASU’s were rejected by the SAPWG during the meeting:
- ASU 2018-08 – Not-For-Profit Entities: Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made
- ASU 2019-03 – Not-For-Profit Entities: Updating the Definition of Collections
After nearly a year and a half of hard work, on May 15, 2019, the Reinsurance (E) Task Force adopted the necessary revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) (the Models) to implement the collateral provisions of the Bilateral Agreement between the United States of America and the European Union (EU) on Prudential Measures Regarding Insurance and Reinsurance and the Bilateral Agreement between the United States of America and the United Kingdom on Prudential Measures Regarding Insurance and Reinsurance (collectively, the Covered Agreements). The revisions were subsequently adopted by the Task Force’s parent committee, the Financial Condition (E) Committee, on May 28, 2019, and then by the Executive (EX) Committee and Plenary on June 25, 2019.
With revisions to the Models complete, the Task Force turned its attention to the implementation process. The Covered Agreements became operative September 22, 2017 and states have five years to adopt the necessary reinsurance reforms or face potential federal preemption by the Federal Insurance Office (FIO). State legislatures were sent a formal notice of the adoption of the revisions to the Models on July 16, 2019.
Additionally, there are a number of items to be completed by other NAIC groups, including revisions to the Accounting Practices and Procedures Manual (AP&P Manual) by the SAPWG and revisions to Schedule F and Schedule S of the Blanks by the Blanks (E) Working Group.
The Task Force also discussed the Models as an Accreditation Standard. The Financial Regulation Standards and Accreditation (F) Committee agreed that states may begin adoption of provisions that are substantially similar to the 2019 Model revisions and remain in compliance with current accreditation standards. Given the October 1, 2022 deadline in the Covered Agreements, states are encouraged to adopt the revisions to the Models and not delay until the accreditation standard is revised.
Innovation, Technology and Cybersecurity
The Innovation and Technology (EX) Task Force heard updates on cybersecurity and privacy initiatives and issues, including a legislative update on adoption of the Insurance Data Security Model Law #668. As of August 6, 2019, eight states have adopted the Model Law. The Treasury Department has endorsed Model #668 and has “recommended its prompt adoption by the states to avoid congressional action.” The Task Force heard from NAIC staff regarding the different NAIC model laws and regulations that currently address privacy. After this report, the Task Force adopted a recommendation to refer a charge to the Market Regulation and Consumer Affairs (D) Committee to “review state insurance privacy protections regarding the collection, use and disclosure of information gathered in connection with insurance transactions.”
The Task Force also discussed issues regarding anti-rebating provisions in the Unfair Trade Practice Act (Model #880) that were brought forward by insurers, brokers and InsurTech firms as potentially impeding innovation. After a lengthy discussion, the Task Force adopted a motion to start the process to pursue amending and updating Model #880.
Risk Retention Groups (RRGs)
The Risk Retention Group (E) Task Force exposed revisions to the NAIC Uniform Risk Retention Group – Notice Registration form. The revisions are intended to ensure the questions and expectations are clear, to limit the time necessary to determine if an application is complete and accurate and to reorganize the information into a more user-friendly format.
The Task Force also exposed a Frequently Asked Questions (FAQ) document and a Best Practices document. These documents were developed in response to concerns expressed by both industry and state insurance regulators. Both documents are intended to assist states with the registration of RRGs and include information about the federal Liability Risk Retention Act, the role of the domiciliary state in overseeing an RRG and communication between domiciliary and non-domiciliary states.
Each of the documents noted above were exposed for a 30-day public comment period that ended September 6, 2019.
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